Tag Archives: finance

Legal obstacles to moving your money

Now, more than ever, it is imperative that people move their available financial resources away from conventional Wall Street investments that offer the illusion of security toward real assets that can provide real security in basic living essentials. There are however legal obstacles that limit our ability to do that.

One of the best resources for information about that is Cutting Edge Capital. The September 2011 newsletter is a good place to start. Be sure to listen to Jenny Kassan’s presentation, ACCELERATING COMMUNITY CAPITAL WORKSHOP: The Legal Landscape, given at the recent BALLE conference.

Advertisements

Investing in Uncertain Times

A few weeks ago, after I commented on something she said in her monthly newsletter, author and alternative financial consultant, Susan Boskey (Susan@AlternativeFinancialNow.com), asked me to write something about investing for a subsequent issue. (You can find additional information on her website). Here is the article I wrote, which she has published. It expresses my idea about our current situation, and my advice about how to better use our resources in this time of transition.  – t.h.g.

Investing in Uncertain Times

Thomas H. Greco, Jr.

Many people today are in a quandary about their personal savings and investments. The conventional advice has it that every family should have three to six months’ living expenses squirreled away. But that begs another question which is, in what form should that ‘nest egg’ be held?

Is it safe and prudent to leave it in a bank? Should I buy bonds, or stocks, or real estate, or commodity futures? How can I balance risk with income and capital appreciation? These are questions that are difficult to answer even in “normal” times, but the present situation seems especially uncertain. The near financial meltdown of a couple of years ago coupled with the ongoing stream of bad economic news leads one to wonder, along with billionaire George Soros, is this the end of an era?

I think it is. My view on the matter is that the era of economic growth is over, kaput, finished. If you stop for a minute to think about it, you must admit that we live on a finite planet, that we are rapidly using up the available resources, that we are adding ever more pollution to our air, water and land, and that the distance (in time) between the end of the production line and regional dump is growing ever shorter. This cannot continue. Nature shows us that nothing grows forever. What would it be like if children never stopped growing? What happens as insect or animal populations grow? They either level off or experience a catastrophic collapse.

So, if we cannot expect the economy to return to what has been “normal” in our past, what can we expect? I believe that we must, and in fact are right now transitioning toward a steady-state economy, one in which overall quantitative growth is supplanted by qualitative development, i.e., an improvement in the conditions of life that really matter,

This is a transition that I compare to the metamorphosis of the caterpillar into the butterfly. The caterpillar’s role is to eat and to grow, i.e., to accumulate the resources that will be used during the chrysalis stage by the emergent butterfly as it assembles itself into a new and different creature. The butterfly behavior contrasts sharply with that of the caterpillar. While the caterpillar can be very destructive as it devours plants, the butterfly helps to pollinate them as it sips nectar from their blossoms.

So, if this is an apt description of what is going on, we ought to withdraw our resources from Wall Street investments that perpetuate “the Caterpillar economy” of endless consumption and despoliation, and start investing in “the Butterfly economy,” which is more equitable, sustainable and restorative of the environment upon which our lives ultimately depend.

This can be achieved through

  • the Localization of Production,
  • on a Human Scale,
  • for Local Consumption,
  • using Locally Available Inputs.

As our communities become more self-reliant, we become more secure, providing for ourselves more of our food, energy, housing and other necessities of life.

Right now, the economy is in a depression because in the wake of the last bubble-bust cycle the private productive sector is being starved for credit while the wasteful government-military-industrial-financial sector is appropriating ever more resources to keep itself alive. There is not much we can do about that since the political power is mainly in the hands of those interests. But we can use our own resources in our own communities to secure a better future for ourselves and our descendants.

In a depression “cash is king” because many people don’t have enough of it to cover ordinary living expenses. At the same time, the money powers are inflating the currency at unheard of rates, so ultimately fixed-dollar securities, including bank deposits, will be eaten up by rising prices.

If savers and small investors can buy into local enterprises that provide returns as a share of their actual product, they can achieve some measure of security (in food and energy, for example) while transforming depreciating dollars into something (like food, or alcohol for fuel to replace gasoline) that will become increasingly valuable as time goes on. Use value is becoming more important than market value, and personal responsibility and local cooperation are becoming more important than reliance upon declining institutions and structures.

#     #     #

Here are a few links to pertinent information:

The Worsening Debt Crisis – An Interview With Michael Hudson

Michael Hudson is a very astute observer of economics, finance, politics, and history.
When he speaks everyone should pay attention.

I strongly recommend that anyone who wishes to understand, not just economics and finance, but our general socio-political predicament should read his entire interview.

I agree with his statement that “The economy has reached its debt limit and is entering its insolvency phase. We are not in a cycle but the end of an era. The old world of debt pyramiding to a fraudulent degree cannot be restored.

He says “the only basis for borrowing more is to inflate the price of real estate that is being pledged as collateral for mortgage refinancing.” That was the reason for the banks creating the real estate bubble in the first place, to provide a basis for lending ever more credit (debt-money) into circulation.

The political debt-money system contains a debt and growth imperative because of the compound interest that is attached to loans. To keep the game going there are two choices, expand debt by lending to the government sector (by running budget deficits), or expand debt by lending to the private sector (liberal lending to enable people to buy whatever (real estate, stocks and other securities, commodities, education (student loans), cars and other stuff, what else?)). When incomes are not sufficient for the debt burden to be carried, defaults occur. Defaults can be denied and deferred by various tricks — e.g., refinancing to reduce payments by extending length of repayment. When a financial institution has such extreme cash flow problems as to be unable to continue denial, the government will come in with a bailout plan that leaves the taxpayer to foot the bill. Now, it becomes the public sector’s turn to carry the expanding debt burden.

I am in full agreement with Hudson’s claim that, “It is pure hypocrisy for Wall Street’s Hank Paulson to claim that all this is being done to “help home owners.” They are vehicles off whom to make money, not the beneficiaries. They are at the bottom of an increasingly carnivorous and extractive financial food chain.”
The parasitic nature of the system becomes ever more evident. Either the host becomes increasingly sick and eventually dies, taking the parasites with it to the grave, or the host will act on the increasingly strong signals of malaise and find a way to expel the parasites or keep them in check. Nature shows us that co-existence is a possibility but only if the parasites are held within certain bounds. The New Deal of FDR was a temporary expedient to do just that. One could argue that FDR saved Capitalism.

Hudson clearly states what I have been trying to get across to people: “What people still view as an economic democracy is turning into a financial oligarchy. Politicians are looking for campaign support mainly from this oligarchy because that is where the money is. So they talk about a happy-face economy to appeal to American optimism, while being quite pragmatic in knowing who to serve if they want to get ahead and not be blackballed.”

So don’t expect Obama to do much different.

Hudson correctly observes that “financial interests have replaced the government as society’s new central planners.”
They control politics and everything else. – t.h.g.